Ethiopian Airlines flies high with 0 funding from government

Ethiopian Airlines flies high with 0 funding from government

- Tewolde GebreMariam took over from Girma Wake as Ethiopian’s Group Chief Executive Officer

-GebreMariam surpassed targets under Vision 2025 without financial backing from the government

- No other African carrier is growing at same pace and none have made profit in past seven years

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It was 1.35 pm on 15 February and one of Ethiopian Airlines’ 114 modern aircrafts had just touched down at Bole International Airport (BIA) in Addis Ababa from Jomo Kenyatta International Airport (JKIA) in Nairobi, Kenya, where it departed at around 11.35 am.

The average flight duration between the two capital cities is 1 hour and 55 minutes covering a distance of 1164 kilometres (km) at an average speed of 606 kilometres per hour.

Upon landing at Bole International Airport, Ethiopian Airlines’ main hub, around 204 passengers were ushered into standby airport shuttles and driven to the baggage collection hall where they picked their luggage and then proceeded to the customs area, armed with travel documents, for final clearance, Briefly.co.za found.

It is a standard and routine procedure.

Currently, an estimated 31,000 passengers travelling to or from more than 120 destinations go through the same mandatory security procedure at the Addis Ababa-based airport every day.

This translates to about 930,000 every month and 11 million passengers per annum, a remarkable growth from just three million in 2011. And the numbers keep rising.

No other flag carrier in Africa is moving such volumes or growing at the same pace.

In fact, all the major African national carriers have been flying on massive losses and debts for the past seven consecutive years despite huge financial backing from their respective governments, except Ethiopian Airlines.

Contrary to numerous media reports that the carrier has been going strong because of financial support from the Government of Ethiopia which owns 100% of the airline, the truth is that the carrier has never received a single cent from the government.

“The airline is supported by itself. Yes, it is owned by the government, but it is fully managed by professionals. No single cent comes from the government. No sovereign guarantees,"

"We don’t need it, anyone can verify this from our annual report which is a public information," said the Group Chief Executive Officer (GCEO), Tewolde GebreMariam, the man behind Ethiopian’s unmatched growth momentum, in an exclusive interview with Briefly.co.za.

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He added Ethiopian Airline is being audited by a number of internal and external auditors who can confirm that there is no single cent injected in it by the government.

"It is a baseless allegation and fabricated excuses made by some airlines to justify their internal weaknesses,” he said.
Ethiopian: Africa’s largest, most profitable airline flies high with zero funding from government

As of February 2019, Ethiopian Airlines' fleet size had grown from 33 aircrafts in 2010 to a record 111 modern aircraft. Photo: Eedwin Ochieng'/Briefly.co.za.

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GebreMariam, an aviation industry veteran with a plethora of prestigious accolades under his belt, among them the African CEO of the Year award, the Best African Business Leader award, and most recently the Most Influential People of African Descent award, has been steering the airline’s growth for close to a decade now.

Before he was appointed as Group CEO, he had already been with the carrier for 26 years, which brings the total number of years he has worked with the airline to a staggering 34 and still counting, Briefly.co.za reported.

One would wonder why he has never considered exiting the 74-year-old carrier.

“Sometimes I joke that either I am stuck with Ethiopian or Ethiopian is stuck with me,” said the 52-year-old father of five with a contagious smile.

From where he sits at the Group’s 60-year-old headquarters, about 10 minutes’ drive from the majestic Bole International Airport’s brand new passenger terminal, he can clearly see the future of Ethiopian and knows exactly what needs to be done to keep the airline flying ahead of the pack.

Talking of the six-decade-old head office, why has it never been refurbished despite the airline having invested heavily on numerous infrastructure projects?

“It doesn't produce anything; it is only for me and my colleagues. We can afford to operate from here. As long as the building doesn't collapse on us, we will be just fine,” he responded with a disarming frankness.

For the Group CEO, it all boils down to being cost-conscious.

Ethiopian: Africa’s largest, most profitable airline flies high with zero funding from government

GebreMariam has worked with Ethiopian for a staggering 34 years and still counting. He served in different capacities and ascended the career ladder to become Group CEO. Photo: Edwin Ochieng'/TUKO.

GebreMariam who prefers to work more and play less and admits he often finds himself in real quagmire when it comes to juggling between his work and social life, rose through the ranks to become the head of the largest airline in Africa and one of the fastest growing flag carriers globally.

From the cargo traffic handling department where he served in different capacities, he was appointed as the regional director for India and South East Asia based in Bombay and later moved to Jeddah as Area Manager for Saudi Arabia, one of the busiest countries.

He was then transferred to New York as Area Sales Manager when Ethiopian Airlines’ direct flights to America took off.

In 2004, he returned home to Ethiopia from New York to join his predecessor, Girma Wake, who was by then planning to retire.

“He (Wake) called me from New York to head the marketing department. Thereafter I was appointed Chief Operating Officer (COO). As the COO, a new position in the company then, I assumed about 80% of the airline’s operations. It also meant I was preparing myself to take over,” said GebreMariam.

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Setting new pace

He eventually took over from Wake as Ethiopian’s Group CEO on January 1, 2011, and without wasting time, he prepared the airlines’ 15-year Vision 2025 blueprint, a scaled up version of the company’s five-year Vision 2010.

“The reason why we made it 15 years is because we were basing our future on two most important airplanes in the world…airplanes of the 21st century. And these were the Boeing 787 Dreamliner and A350-900 from the Airbus family. So we needed some time to plan and also understand the new technology in the aviation market,” he explained.

Under the new comprehensive master plan, GebreMariam wanted to grow the airline’s revenue from R138 billion (KSh 100 billion) in 2009, to R138 trillion (KSh 100 billion), fleet size from 40 to 112, number of passengers from 3.8 million to 17.8 million, and international destinations from 60 to 92 by 2025.

The new boss’s vision for the flag carrier was so ambitious people thought he was dreaming, and that the targets he set for himself and the airline could not be achieved within the stipulated time frame.

“When we came up with the Vision 2025, many people, both inside and outside the airline, especially those specialising in aviation, didn't have the confidence in our numbers. The numbers were very high, so everybody said it was overambitious,” the Group CEO recalled.

But they were wrong.

Ethiopian: Africa’s largest, most profitable airline flies high with zero funding from government

Ethiopian Airlines serves 118 international and 21 domestic destinations operating the newest fleet in the industry. Photo:Edwin Ochieng/Briefly.co.za.

Eight years later, GebreMariam has exceeded all the targets they set under Vision 2025 plan, six years ahead of the deadline, except revenue which they are also nearing the target.

The airline’s annual revenue had grown from R13.8 billion (KSh 100 billion) in 2010/11 FY to near R55 billion (KSh 400 billion) in 2017/18 FY.

The number of passengers had increased from three million to a record 11 million whereas freight tonnage had shot up to 400,339 tons from 225,897 tons in 2010/11.

The airline currently serves 118 international and 21 domestic destinations operating the newest and youngest fleet in the industry.

Ethiopian Airlines, a Star Alliance member, in 2018 surpassed Dubai as the main gateway for long-haul travel to and from Africa.

Its fleet size has grown from 33 aircraft to a record-breaking 111 modern birds, all equipped with the latest aviation technology.

“In the airline industry, if you make a mistake in fleet decision, it becomes very hard to succeed. So we made the right decision in fleet. We had to balance…we needed to have all kinds of short, mid and long range fleet,” the Group CEO said.

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The airline has also been working on fleet modernisation and as already indicated, they have a very young fleet with an average fleet age of five years, whereas the global aviation industry average fleet age is 12 years.

“The young fleet are cost-effective in terms of fuel consumption and also environmentally very friendly,” GebreMariam said.

All the aircraft are maintained and repaired at the Bole International Airport where the company also services airplanes from other African carriers including Angola, Equatorial Guinea and Nigeria at a fee.

The airline’s Skyrax rating, a global airline quality rating programme, equally improved from three-star in 2010 to four-star.

“In terms of ranking in the continent, when we started Vision 2025 in 2010, we were number four, behind South African Airways (SAA), Egypt Air and Kenya Airways (KQ). But now we are a distant number one. It has been an exceptional and successful journey so far,” GebreMariam said.
Ethiopian: Africa’s largest, most profitable airline flies high with zero funding from government

Ethiopian's aircraft are maintained and repaired at the Bole International Airport where the airline also services airplanes from other African carriers. Photo: Edwin Ochieng/Briefly.co.za

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Revamped and new facilities

As Ethiopian Airlines continues with its rapid growth, its facilities have also been expanding, albeit not at the same pace.

The airline’s main hub has been undergoing major expansion in the recent years with a brand new passenger terminal already complete and in operation.

“The rapid growth had put some strain on our available facilities and customer service delivery at the main hub, but this will soon be a thing of the past with the launch of our expanded terminal,” the Group CEO assured.

The brand new terminal has an annual capacity of 22 million passengers, making Bole International Airport the largest in the continent, overtaking South Africa’s Oliver Tambo International Airport in Johannesburg which currently handles 21 million passengers per annum.

The revamped Bole International Airport was constructed with all the amenities and services befitting a 21st century airport, including a 5-star hotel, the largest in Ethiopia.

The luxury hotel, Ethiopian Skylight Hotel, is five minutes’ walk away from the airport and offers all sorts of affordable tour packages.

The (KSh 6.5 trillion) hotel has the largest Chinese restaurant, the largest Ethiopian cultural restaurant and one of the largest conference halls in the Eastern Africa region.

It has 373 rooms and a conference hall which can accommodate 2,500 guests at once.

And here is the main reason why this particular facility is important to the airline.

“Many people are asking us why we ventured into hotel. As you know, our country Ethiopia is lagging behind in tourism sector despite its very rich history, culture, wildlife and natural resources put together. We have not done a very good job as a country to promote Ethiopia as a tourism destination,” GebreMariam said.
Ethiopian: Africa’s largest, most profitable airline flies high with zero funding from government

Ethiopian Skylight Hotel is the largest 5-star hotel in Ethiopia. It has 373 rooms and a conference hall which can accommodate 2500 guests at once.Photo:Edwin Ochieng'/TUKO.

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So since the Government of Ethiopia has renewed the initiative to promote tourism and now considers it a priority sector in the national economic development, the Group CEO wants Ethiopian Airlines to play a catalyst role as a national carrier.

“We want to package air transport and hotel together and sell it in the international market. We are mainly targeting China because Chinese are now the biggest tourists in the world. This is the main reason why we are in the hotel business,” he said.

Venturing into hotel business, growing fleet size, expanding the infrastructure and human resource development all put together constituted Ethiopian Airlines’ four pillars under the Vision 2025 plan.

All these developments and several others have been realised without any financial backing from the Government of Ethiopia as many have been made to believe.

“Government ownership has never been a determining factor for growth. Ownership could only be a success or failure factor if the owning government makes political interference on business decisions. But I can only talk about Ethiopian Airlines and I cannot talk on behalf of other airlines,”GebreMariam said

Indeed, if state ownership could bring about growth, then it would have worked for SAA, or KQ which also used to be owned by the government before it slashed its majority shares to 48.9% in a public-private partnership (PPP) arrangement, perhaps with the hope that change of ownership could help fly the loss-making flag carrier back to its former glory.

Well, neither SAA nor KQ has made profit in the past seven consecutive years.

State-owned SAA last made profit in 2010/11FY and is expected to continue with its string of losses going by the International Air Transport Association (IATA) projections.

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The South African national carrier posted KSh 40.61 billion (US$ 405.63 million) net loss in 2017/18 FY, its biggest loss in seven years.

Kenya Airways on its part, suffered a KSh 4 billion (US$39.9 million) loss in 2018 half year results, a 30% drop compared to KSh 5.6 billion (US$55.9 million) loss recorded during the same period in 2017.

The Kenyan flag carrier, once befittingly feted as "the Pride of Africa", last posted profit in 2010, just like SAA, after which things went south with losses soaring up to KSh 29.7 billion (US$296.7 million) in 2014/15 FY, the worst loss ever in the country’s corporate history.

Meanwhile, as SAA, KQ and other African national carriers reeled under the weight of colossal losses, year in, year out, Ethiopian Airlines, seven times Best African Airline of the Year award winner, kept crashing its own growth targets and propelling revenues to new heights.

The Ethiopian has been flying on profit for seven years in a row and continues with its upward growth trajectory with zero support from its owner.

The airline’s net profit hit KSh 28.52 billion (US$ 285 million) in 2015/16, a 65% growth from KSh 17.31 billion (US$ 173 million) in 2014/15.

It recorded a profit of KSh 23.3 billion (US$ 233 million) in 2017/18, a KSh 400 million (US$ 4 million) increase from KSh 22.9 billion (US$ 229 million) recorded in 2016/17.

Since it deposed SAA and outpaced Air Mauritius, Air Seychelles, EgyptAir and KQ to become Africa’s number one in a span of eight years, Ethiopian has pretty much been competing with itself.

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What is their winning formula?

“One of the reasons why we are always profitable is because we have long time planning in every aspect. This means doing the right things at the right time...For instance, if you need an airplane today and you go to the market, you are going to pay more to get that airplane, but if you had planned for the airplane that you want to buy today 10 years ago, then you would have paid less for the same plane,” GebreMariam said.

The Government of Ethiopia has, however, been considering selling minority shares to interested African counties given that the country’s economy is now more liberalised.

The government, GebreMariam confirmed, had decided that Ethiopian can also attract direct foreign investors and talks are on-going.

“We have not been able to figure out how and when but it is under consideration,” he said.

Building human resource

Initially, there were concerns that owing to the airline’s rapid growth, shortage of qualified professionals would be an obstacle.

Fortunately, the airline has gradually been able to fly out of the human resource dilemma.

In the past eight years, the company’s number of employees has skyrocketed to more than 16,000, most of whom were trained at the Ethiopian Airlines’ Aviation Academy.

The academy, which can train up to 4,000 students per year, is equipped with seven full flight simulators used to train pilots.

Each of the simulators cost the airline an estimated KSh 2 billion (US$ 20 million) and in total KSh 14 billion (US$ 140 million).

“The Academy has done a very good job. We have been training pilots, technicians and cabin crew. And we are now self-sufficient with all the aviation professionals,” the Group CEO said.
“We are training 300 pilots every single year. So far we have about 1000 pilots on the payroll," he added.
Ethiopian: Africa’s largest, most profitable airline flies high with zero funding from government

Since 2010, Ethiopian Airline's number of employees has grown to more than 16,000. Most of them were trained at the Ethiopian Airlines’ Aviation Academy. Photo: Edwin Ochieng'/Briefly.co.za

The cost of training one pilot, according to GebreMariam, is about KSh 10 million (US$100,000), but he is happy with the programme because they are not producing pilots for the Ethiopian Airlines alone.

“I am very proud that we are generating high quality pilots for Africa. At least 300 pilots are trained every year, and these pilots are not trained just for Ethiopian Airlines but for the African market,” the Group CEO said.

Besides the training, employees’ support and motivation is very important for company and it has been investing heavily towards this end.

The 16,000 Ethiopian employees are provided with free transport to and from work.

The airline has 40 big buses and more than 60 land cruisers dedicated to providing transport services to staff.

“We also have six employee cafeterias…very nice cafeterias which can feed about 1,000 people at a time each. The food is highly subsidised, so vegetarian lunch can cost you about 30 cents US dollars,” GebreMariam said.

Most notably, the flag carrier has a housing project aimed at providing decent and affordable housing for all its employees.

The multi-billion dollar project has two phases and the first one, which has 1,200 houses, has already been completed and delivered.

“The second phase is a big one. Because the airline is growing, we are going to construct 12,000 apartments. We call it Ethiopian Village, situated on the outskirts of Addis Ababa. The houses would be mortgaged. The employees will sign membership and pay for the houses from their salaries over 15 years instalments.

The bigger picture

In January 2018, some African countries ratified the Single African Air Transport Market (SAATM), a project of the African Union (AU) aimed at creating a single market for air transport in Africa which will allow significant freedom of air transport in the continent in line with the AU's Agenda 2063.

GebreMariam believes this is a wise move.

“African skies have always been more open to non-African carriers than African carriers, and as a result the Gulf Carriers have been invading African skies. So it is high time for Africa to focus on having a single air market to freely fly without restriction,” he said.

GebreMariam opined if the single African air transport market fails, then Africa could soon have zero shares in the continent from the current 20% as most of its carriers continue to struggle.

“Develop the aviation sector in the continent by the people of the continent. This has been a challenge, and the end result of that challenge is 80% of air traffic between Africa and the rest of the world is controlled by non-African carriers,” the Ethiopian boss said.

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Source: Briefly.co.za

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